Spotting Mortgage Fraud
I don't want to get too far into James Thorner's recent article entitled "Island of Disenchantment" in the Money section of the St. Petersburg Times for Sunday April 6th, but I do want to say a couple of things designed to help people identify a potential case of mortgage fraud.
In case you missed Thorner's story, he reports that property values in Clearwater's Island Estates soared in recent years primarily as a result of the activities of one realtor, Marty Donovan. (Frankly, I think Thorner gives Donovan too much credit for making the market on Island Estates, but that's another story.) Now, prices have dropped more than 45 percent since 2006, and critics blame Donovan for inflating prices on the island.
Apparently Donovan went on a property buying spree during the spring and summer of 2006. He bought a house at 213 Leeward Island for $1.3-million that was listed for only $998,000. The owner was paid the asking price and the balance went to Donovan's business partners to allegedly make repairs to the fifty year old house.
Well, you guessed it. The repairs never were made. Donovan stopped making payments on the mortgage. The mortgagee foreclosed and has the house on the market for only $451,000, thus driving down property values throughout Island Estates. And nobody can account for the missing money that was supposed to go for repairs. Donovan skipped town in December, moving to Lynchburg, Virginia, and the banks have foreclosed on six of his remaining properties valued at over $7-million.
Now, people who live on Island Estates say Donovan's activities have resulted in property values falling like a rock. They want Donovan tarred and feathered.
Sound suspicious? It should. This is one of the most common scams in the world of real estate. Donovan says he believed his business partners who said the homes would continue to appreciate in value and they would all make a legitimate profit. Donovan claims he was duped by his partners.
Look, I don't know anything about this matter, but I do want to pass along three things about mortgage fraud to every reader, be they a real estate agent or a homeowner.
1. Just because somebody has a real estate license, it does not mean they know anything about real estate. Donovan says he was duped. Maybe he was. This case sounds like a classic case of mortgage fraud to me. Frauds always sound legitimate on the surface, that's why so many people get taken-in by the bad guys. Donovan might have been just a stupid, inexperienced real estate agent who got sucked-in by some crooks looking to make a fast buck using his real estate license. The point is, if he's innocent he should have known better. If he's guilty, well, heat up the tar and pluck a few chickens.
2. Anytime a buyer wants to get a mortgage for more than the asking price, be very suspicious. In a legitimate transaction, buyers want to get the house for the best possible price, and lenders want to make sure of the property's value before they make any kind of loan. There are lots of ways for buyers to fund needed repairs after they have purchased the property in a legitimate matter. This business of faking a higher price with the difference going to the buyer is, as my dear departed father used to say, "crooked as a barrel of snakes".
3. If you don't know much about mortgage fraud, take a class. The Pinellas Realtor Organization offers classes in real estate fraud from time to time, and other organizations and individuals do as well. If you don't know what to look for, take a class, talk to your broker, or call somebody in the mortgage field and get their take on the matter before you proceed.
Thorner's article states that Donovan would like to return here someday and re-establish himself in real estate. If he's guilty of any of this, I'd say getting back into the business here is kind of a long shot for him. After all, somebody might ask him why he's wearing all those feathers.
For more information about real estate in the Tamp Bay area, please visit my website at http://www.thestpeterealestatesite.com/.
In case you missed Thorner's story, he reports that property values in Clearwater's Island Estates soared in recent years primarily as a result of the activities of one realtor, Marty Donovan. (Frankly, I think Thorner gives Donovan too much credit for making the market on Island Estates, but that's another story.) Now, prices have dropped more than 45 percent since 2006, and critics blame Donovan for inflating prices on the island.
Apparently Donovan went on a property buying spree during the spring and summer of 2006. He bought a house at 213 Leeward Island for $1.3-million that was listed for only $998,000. The owner was paid the asking price and the balance went to Donovan's business partners to allegedly make repairs to the fifty year old house.
Well, you guessed it. The repairs never were made. Donovan stopped making payments on the mortgage. The mortgagee foreclosed and has the house on the market for only $451,000, thus driving down property values throughout Island Estates. And nobody can account for the missing money that was supposed to go for repairs. Donovan skipped town in December, moving to Lynchburg, Virginia, and the banks have foreclosed on six of his remaining properties valued at over $7-million.
Now, people who live on Island Estates say Donovan's activities have resulted in property values falling like a rock. They want Donovan tarred and feathered.
Sound suspicious? It should. This is one of the most common scams in the world of real estate. Donovan says he believed his business partners who said the homes would continue to appreciate in value and they would all make a legitimate profit. Donovan claims he was duped by his partners.
Look, I don't know anything about this matter, but I do want to pass along three things about mortgage fraud to every reader, be they a real estate agent or a homeowner.
1. Just because somebody has a real estate license, it does not mean they know anything about real estate. Donovan says he was duped. Maybe he was. This case sounds like a classic case of mortgage fraud to me. Frauds always sound legitimate on the surface, that's why so many people get taken-in by the bad guys. Donovan might have been just a stupid, inexperienced real estate agent who got sucked-in by some crooks looking to make a fast buck using his real estate license. The point is, if he's innocent he should have known better. If he's guilty, well, heat up the tar and pluck a few chickens.
2. Anytime a buyer wants to get a mortgage for more than the asking price, be very suspicious. In a legitimate transaction, buyers want to get the house for the best possible price, and lenders want to make sure of the property's value before they make any kind of loan. There are lots of ways for buyers to fund needed repairs after they have purchased the property in a legitimate matter. This business of faking a higher price with the difference going to the buyer is, as my dear departed father used to say, "crooked as a barrel of snakes".
3. If you don't know much about mortgage fraud, take a class. The Pinellas Realtor Organization offers classes in real estate fraud from time to time, and other organizations and individuals do as well. If you don't know what to look for, take a class, talk to your broker, or call somebody in the mortgage field and get their take on the matter before you proceed.
Thorner's article states that Donovan would like to return here someday and re-establish himself in real estate. If he's guilty of any of this, I'd say getting back into the business here is kind of a long shot for him. After all, somebody might ask him why he's wearing all those feathers.
For more information about real estate in the Tamp Bay area, please visit my website at http://www.thestpeterealestatesite.com/.
-30-
posted by Terry Ward at 7:30 AM
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